eThekwini Municipality faces R500 million lawsuit

A new legal battle is looming between the eThekwini Municipality and Africa Utility Solutions after the City failed to correct a published news report that suggested that the company supplied dysfunctional electricity smart meters which cost R500 million.

The company is the same one that recently scored a court victory against the City over the non-payment of R63 million which came with interest.

In a letter of demand served to the City by the company’s lawyers, it demanded the City issue a statement within 30 days countering the published news report that the company said was false.

Should the City not heed and negotiate compensation, the company will sue for R500 million for the financial loss and reputational damage caused by the misinformation that the City has “failed” to correct.

However, in response to the letter, the City said it was not liable for any alleged damages that the company may have suffered as a result of the article published without the municipality’s participation. The company stated that the City issued a tender in March 2021 calling on suppliers to bid for the supply, delivery, and off-loading of three-phase electricity meters. In August 2022, it was awarded the work.

“Pursuant to the receipt of the aforementioned letter of award, our client received various purchase orders from the eThekwini Municipality for the delivery of meters to its nominated address. Our client duly complied with its obligations in terms of the aforesaid tender and delivered to the eThekwini Municipality the meters in terms of the aforesaid purchase orders,” said the letter.

However, the company said it was shocked when it saw an online publication with a headline that boldly suggested that the City paid R500 million for smart meters that did not work.

It argued that the allegations in the said article were “factually incorrect, misleading and patently false.”

“Furthermore, the context of the article was wrongful and defamatory to the company and its representatives in that they were intended and were understood by the readers of the article to mean that the company and its representatives were dishonest, have engaged in acts of fraud, were in a corrupt relationship with eThekwini Municipality.”

The company said the City’s failure to give correct accounts that the company complied with the work specification of the tender was concerning.

“It said it has been more than 3 weeks since the publishing of the wrong information and the Municipality has not corrected so as a direct consequence the company has already suffered losses with the withdrawal of contracts awarded to its client with the total loss thereof being R48 384 000-00, a projected loss of R78 000 000-00 in respect of future work that is to be allocated in terms of the National Treasury Regulations as well as the non-award /suspension and/ or termination of various contracts that should be awarded to it which amounts to R203 092 500-00.

“In light of the aforegoing, we are instructed to demand that the eThekwini Municipality release a public statement confirming that all the electricity meters supplied by our client complied with eThekwini’s requirements and are successfully operational in the field. In the event, that the eThekwini Municipality does not release the public statements and engage with our client to compensate it for the damages that it has suffered, then we have been instructed to institute a damages claim in the sum of R329 476 500 plus a reputational damage claim of no less than R150 000 000. Our client will proceed with legal action against the eThekwini Municipality without further notice,” concluded the letter.

EThekwini Municipality spokesperson Gugu Sisilana said: “The letter in question was responded to by the municipality and such response was directed to the author of the letter on 17 October 2024. The municipality’s position on its legal duty to make a public statement on these matters is contained in the said correspondence.”

However, the Daily News has seen the City’s response addressed to the company, wherein it denied responsibility for the published information, saying it was not the municipality that published the article and those internal sources quoted were not speaking on behalf of the city.